Thermo Fisher is spending a major $17.4 billion to buy out contract research organization PPD.
If a major medtech/testing company buying a CRO sounds familiar, it’s right out of the LabCorp playbook, which a few years back nabbed CRO Covance for $5.6 billion.
Thermo Fisher is going to try its hand using the same tactic, but with the much larger PPD. This comes not only after that Covance deal, but the more recent megamerger between Icon and PRA Health for $12 billion, as the CRO sector becomes buoyant in the M&A space once again.
The PPD deals sees the $187 billion market capped Thermo Fisher add a few billion on top of PPD’s around $13 billion market cap, and add one of the world’s largest CRO players to its bow.
These things are never full-gone conclusions, however; just ask Thermo Fisher itself, which last summer saw a Qiagen buyout plan, worth $12.5 billion in the end, fall through after it was rejected. The company still has that money to buy, however, and has now shifted focus to clinical research.
Like the whole CRO sector, PPD has had a rocky ride during COVID-19, which its shares up and down, alongside its earnings, as the pandemic struck its ability to do business.
But things have been looking up: In the fourth quarter, income leapt 30.3% to $1.36 billion, compared to $1.04 billion for the last fourth quarter. This was boosted by two main areas: its clinical development services, making $1.1 billion, up 28.3% on the year-ago period, and its laboratory services, up 40.1% to $254.2 million.
For the fourth quarter, earnings per share increased 18.18% over the past year to $0.39, which beat the estimate of $0.36, whilst revenue beat out the $1.28 billion estimate.
Despite some tough quarters, notably the second, and echoing the trend across the contract research industry, PPD has bounced back for the year, raking in $4.68 billion, up 16.1% on 2019’s figures.
After yanking its full-year guidance last year, PPD was more confident during its annual financials published back in February, eyeing a low of $5.14 billion to a high of $5.3 billion in sales. It’s also been heavily involved in running vaccine trials for COVID-19, including Moderna and the National Institutes of Health’s tests for the biotech’s mRNA vaccine, which has been given emergency use status in the U.S. and U.K.
The company went public, again, just over a year ago, raising a massive $1.62 billion for its IPO. It is set to announced its first-quarter financials on April 28, though that may now change.
“Pharma and Biotech is our largest and fastest growing end market, and our customers value us as a strategic partner and an industry leader,” said Marc Casper, chairman, president and CEO at Thermo Fisher.
“The acquisition of PPD is a natural extension for Thermo Fisher and will enable us to provide these customers with important clinical research services and partner with them in new and exciting ways as they move a scientific idea to an approved medicine quickly, reliably and cost effectively.”
“Longer term, we plan to continue to invest in and connect the capabilities across the combined company to further help our customers accelerate innovation and drive productivity, while driving further value for our shareholders.”
“This is a very exciting announcement for our shareholders and will provide customers with an even better opportunity to bring meaningful innovation to the market faster and more efficiently,” added David Simmons, chairman and CEO at PPD.
“Thermo Fisher is a world-class company with a very similar culture and values and will provide a great foundation for our colleagues to continue to deliver for our customers and to develop their own skills and careers.”
Editor’s note: This story updates a previous version that ran on the WSJ’s report that Thermo Fisher was looking to buy PPD for $15 billion.